prop13blows

As someone who generally agrees with you on the benefits of renting, my family has been uprooted twice in the past two years by landlords who wished to convert their assets into cash. And the most recent time, it was a forced downgrade due to rising rents. ¯\_(ツ)_/¯

A two-bedroom house around the corner from me in Oakland, barely larger than 1,000 square feet, just sold for $1,175,000. But what's even crazier is the Prop 13 assessment on this house.

It last sold in 1977 for $30,500. Over the last 40 years, climbing at 2% a year as allowed by Prop 13, it's current assessed value is $60,716, nearly 20X under its actual market value!

This past year, the owners paid $1,857.78 in property taxes: $724.40 in ad valorem tax at a rate of 1.3486% and $1,133.38 in fixed parcel taxes. The new owners will pay $16,979.43 in property taxes, with $15,846.05 due to the ad valorem portion. That's 9X the previous owner, which works out to $1,414.95 a month in taxes!

And the old owners were probably angry about the increasing fixed portion, which went from $548.28 in 2005, to $1,133.38 this past year, and which for them makes up the bulk of their property taxes.

When you look at the actual, concrete numbers, it really is mind-boggling. Prop 13 aside, this house has appreciated 40x in 40 years, only 4x of which is due to inflation. Do you think the new owners will see another 10x in real returns over the next 40 years? Will the sales price in 2058 really be $45 million dollars? Somehow, I doubt it.